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Gas prices expected to surge as Russia shuts off Nord Stream pipeline

Gas prices are expected to surge AGAIN  tomorrow after Russia shut off Nord Stream supply pipeline indefinitely in retaliation for G7’s price cap on Russian oil

  • Pipeline, which runs to Germany under Baltic Sea, was due to reopen yesterday
  • But Russia has kept it offline, citing ‘oil leak’, after G7 agreed on an oil price cap
  • European gas buyers grappling with record-high prices now face further pain
  • Gas prices now likely to surge again, sparking fears that energy may be rationed

Gas prices are expected to soar again when markets open tomorrow after Russia cut off its Nord Stream 1 supply pipeline to Europe – as experts raise fears that energy could be rationed.

The pipeline, which runs to Germany under the Baltic Sea, was due to reopen yesterday after planned ‘maintenance’ works left it out of action for three days.

But Russia has kept Nord Stream offline, citing an ‘oil leak’, after the G7 agreed an oil price cap on Russian energy in further sanctions on the country.

Gazprom, the state-controlled energy firm which controls gas exports, yesterday said it had found ‘oil leaks’ in a turbine in St Petersburg, meaning the supply of Russian gas would remain turned off ‘indefinitely’.  

European gas buyers already grappling with record-high prices are now facing further pain when the markets open on tomorrow, sparking fears over energy rationing.

Lower gas flows from Russia ahead of and following its February invasion of Ukraine have already pushed up European prices by nearly 400 per cent in the last six months, sending electricity costs soaring.

Russia has been accused of weaponising energy supplies in what Moscow has called an ‘economic war’ with the West over the fallout from the Ukraine conflict.

Pipes at the landfall facilities of the Nord Stream 1 gas pipeline pictured in the coastal area of Lubmin, Germany

Britain faces 22% inflation by January as energy giants are predicted to rake in £17BN EXTRA profits 

Britain faces an inflation rate of 22 per cent this winter leaving millions unable to pay the bills and businesses going to the wall while energy firms are predicted to make £170billion extra in profits.

Goldman Sachs predicts inflation will double in 2023 as the price cap on energy bills continues to rise pushed up by soaring gas prices with the rising cost of food and a weak pound also contributing to the crisis that is sending the UK towards recession.

It came as leaked Treasury forecasts, published by Bloomberg, revealed the spiraling crisis will massively profit energy giants as oil and gas producers are predicted to make an extra £170billion as families face the choice between eating and heating this winter because of the cost of crisis catastrophe. 

Pubs across the country that have been open for more than 200 years are closing their doors as their bills soar, with one heartbroken landlord admitting that they would have had to charge £14-a-pint and £40 for a main course to remain solvent.

The predictions of £170billion profits for energy firms will be delivered by Treasury officials to the next Prime Minister on September 6, putting pressure on them to impose another windfall tax to ease the energy crisis this winter.

A tax at the current windfall rate of 25 per cent would bring in billions of pounds for the Treasury to help give assistance to households through the cost of living crisis. 

But the likely winner of the Conservative leadership contest Liz Truss has said repeatedly she is against new taxes and instead wants to cut tax in an effort to create economic growth. 

Ms Truss has insisted that a windfall tax on energy giants massive profits would ‘send the wrong message to investors’. 

In a warning about what she faces if she beats Rishi Sunak, one insider said today: ‘This makes Covid-19 look relatively straightforward’.

The Nord Stream pipeline historically supplied around a third of the gas exported from Russia to Europe.

But it had been running at just 20 per cent capacity before its flows were halted altogether last week to undergo maintenance.

Expectations were that Gazprom would restart the flows at the 20 per cent capacity following the completion of the maintenance work, leading to benchmark Dutch TTF gas prices to fall around 40 per cent from a record high on August 26.

But prices are now likely to surge again after Russia confirmed the pipeline will remain inactive, according to analysts.

Energy Aspects gas analyst Leon Izbicki said: ‘On Friday the market was already pricing in Nord Stream 1 (NS1) flows coming back. 

‘We expect a significantly stronger open for the TTF on Monday.’

Soaring power costs, linked to the rise in gas prices, have forced some energy-reliant industries to scale back.

This includes fertiliser and aluminium makers, which has led EU Governments to pump billions into schemes to help households.

Jacob Mandel, senior associate for commodities at Aurora Energy Research, said the severity of the impact of the Nord Stream cut off will depend on Europe’s ability to attract gas from other sources.

He added: ‘Supply is hard to come by, and it becomes harder and harder to replace every bit of gas that doesn’t come from Russia.’

Following Russia’s invasion, Europe rapidly launched plans to cut its dependence on the country’s fuels, switching to alternative suppliers of gas and other fuels and pushing faster deployment of clean energy supplies.

Germany has begun developing liquefied natural gas (LNG) terminals to enable it to receive gas from global suppliers and move away from Russian gas imports.

It is currently at phase two of a three-stage emergency plan to deal with lower supply. 

A move to stage three would see some gas rationing to industry.

Russian gas is still currently flowing to Europe through pipelines via Ukraine, but speculation is now mounting over whether that too could be halted.

Meanwhile, energy experts from Siemens Energy, which normally services Nord Stream 1 turbines, has slammed Russia’s claims and says an oil leak would not prevent the pipeline from reopening, leading to allegations of ‘psychological warfare’.

‘Such leaks do not normally affect the operation of a turbine and can be sealed on site. It is a routine procedure within the scope of maintenance work,’ the company said.

Michael Roth, chairman of the German parliament’s foreign affairs committee, said last night: ‘This is part of Russia’s psychological warfare against us.’

This followed Kremlin spokesman Dmitry Peskov had suggested there could be more disruptions to deliveries via Nord Stream, sparking fears this may only be the beginning in Russian moves which could further increase energy prices.  

The G7 nations have agreed to penalise firms who help Russia by selling gas above the price cap they have set.

Russia said it was keeping the pipeline offline after G7 leaders agreed to impose price caps on Russian oil

Britain, the US, Canada, France, Italy, Germany and Japan – the countries that make up the G7 – said they would bar insurance for tankers or shipping companies helping Russia in this way.

Since Moscow’s announcement this week, German newspapers are reporting that Ukrainian President Zelensky has offered to sell its nuclear power to Germany in an effort to decrease the impact a lack of Russian energy would have.

Ukraine already exports between 400 and 700 megawatts of energy a day to eastern European countries such as Poland, Romania and Moldova.

Prime Minister Denys Shmyhal spoke out about Ukraine’s plans this morning: ‘Ukraine currently exports its energy to Moldova, Romania, Slovakia and Poland.

‘But we are absolutely prepared to expand our exports to Germany. We have a sufficient supply of in Ukraine thanks to our nuclear power stations.

‘During my visit to Berlin and then Brussels I will pledge this.’

The possibility of a prolonged halt of natural gas supply will cause further difficulties in European countries scrambling to build up gas storage and cut back usage ahead of winter. Britain has moved to shore up energy supplies by putting coal-fired power stations on standby and taking steps to reopen a major gas storage facility.

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